Tesla (TSLA) stock is soaring on Monday after an absurdly bullish note from Morgan Stanley (MS), which slapped a $465 price target on the stock — a 91% premium to Friday’s closing price.
This is getting ridiculous, folks.
Don’t get me wrong, Tesla’s a once-in-a-decade type of company. Driven by renaissance man Elon Musk — the bold entrepreneur and real-life Tony Stark, practically plucked from the pages of the Iron Man comics — the TSLA stock price has soared more than 1,200% in just 5 years, showing off a gravity-defying feat of its own.
But you have a better chance of spotting the Easter Bunny than seeing TSLA stock hit $465 in the next year, no matter how brilliant the CEO is or how brash Wall Street price targets are.
Give It Some Time
It’s not that TSLA won’t ever get to $465. But investors need to be honest with themselves, and honest Tesla investors should know that TSLA is a long-term play. It’s unreasonable to expect the market to pay what Tesla should be worth if everything goes exactly to plan … before Tesla proves it can execute the plan.
You’ve got to apply a discount to allow for that risk. Especially since Tesla isn’t the only player in the market — just the first. Deep-pocketed Silicon Valley giants Apple (AAPL) and Google (GOOG, GOOGL) are both poaching talent and pursuing self-driving electric cars of their own.
Forget about it, says Morgan Stanley’s Adam Jonas, who cited Tesla’s potential to become a ride-sharing giant as the main reason behind his $465 TSLA price target:
“We view this business opportunity as potentially additive to Tesla’s existing model of selling human-driven cars to private owners and see potential for this model to conceivably more than triple the company’s potential revenues by 2029.”
Did you see that? Jonas is projecting Tesla revenue out to 2029 in order to justify his $465 TSLA stock price. We don’t even know if the Fed will raise rates next month, but investors are taking this 14-year projection as gospel.
Anything could happen in the next 14 years. A new competitor could emerge from nowhere. Prohibitive regulations could pop up. Crippling debt could derail the plans. Elon Musk could get hit by a bus (or die on Mars, as is his wish).
Listen, the TSLA stock price will hit $465. Just not anytime soon. The weeks after a subpar vehicle delivery outlook and a larger-than-expected secondary offering announcement is a curious time to call for an imminent 90% rally. And by “curious,” I mean “downright stupid.”
As of this writing, John Divine was long shares of AAPL stock. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
